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Strategies & Market Trends : Take the Money and Run -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (12579)	8/2/2002 1:33:26 PM
From: Dave Gore	Respond to of 17639

Briefing on MSO --- Stock up; Martha to take private with buyout at $12 per share? Business Week breaking the story. Martha Stewart Living (MSO) 8.55 +0.63: Shares of the much maligned Martha Stewart Living company are getting a bit of a boost today as Business Week reports that several people in the Martha Stewart circle say she has been talking to investment bankers about a leveraged buyout (LBO) to take the company private. The idea is that with MSO's shares plunging due to the insider selling investigation of Martha's IMCL shares, it would make sense for Martha to buy all of MSO. When the insider selling mess blows over (assuming it does), she could take the company public again or just keep it private. The article quotes a banker who says it could be taken out at $12 per share, a 40% premium... The company admits the bad press has been a problem. Some advertisers have taken a "wait and see attitude" before buying ad pages in various Martha Stewart magazines. While September ad pages appear to be up, October's look flat at this point. While advertisers are cautious, consumers do not appear to be all that concerned about the matter. K-Mart recently signed a comprehensive deal with MSO to sell Martha Stewart-branded linens, cookware and other household products. The retailer says it has not seen a slowdown in sales of Martha Stewart products. In fact, sales have been doing very well and K-Mart is launching a Martha Stewart Christmas promotion.... Even before the LBO talk, Briefing.com has viewed MSO as a stock beginning to look attractive for patient investors. While there is always a risk with companies that are so closely identified with one person, MSO has widespread appeal. Also, we see it as a positive that Martha will begin to take a lower profile. Expect to see other employees take up space with bylined columns in the company's signature magazine, Martha Stewart Living, as well as in spin-offs like Martha Stewart Weddings. The company has hired a new president of television, and one of her mandates will be to come up with new TV shows that highlight additional personalities and ensemble casts. The company also expects to redesign its direct-to-consumer catalog. MSO trades at less than 1x the current year consensus sales forecast and trades at a p/e of 21x. Perhaps more importantly, MSO has $160 mln in cash, in excess of $3 per share with zero debt which means the ongoing operations are trading at $5 and change. That's not too bad, even if the LBO does not materialize, but we would put a sharp stop loss around 7. -- Robert J. Reid, Briefing.com